Arizona Republicans push steeper state budget cuts

Republican lawmakers are working on a plan to cut up to 60 percent more in spending from next year's budget than the $1 billion Gov. Jan Brewer has proposed.

The plan is being discussed in closed-door sessions and has not yet been aired publicly. But lawmakers say they are aiming for $600 million or more in cuts from the budget for fiscal 2012 so the state won't have to borrow more to pay its bills.

Weary of an ever-increasing debt load, they want permanent cuts that will erase the state's structural deficit, caused by spending in excess of revenue, rather than papering over the problem with accounting gimmicks.

Brewer's spokesman said the governor is open to negotiations but, for now, is sticking with the $9 billion balanced budget she submitted in January. Lawmakers called that plan a good start but want to go further to minimize debt. They must approve a balanced budget and submit it for Brewer's approval before the July 1 start of the next budget year.

The push for deeper cuts sets the terms for budget negotiations expected to continue this month, as the Legislature works toward a possible April adjournment.

More to give

Republicans believe they can wring more savings out of state agencies, which have been cut for the past three budget cycles. The most likely targets are education, support to cities and towns, an across-the-board cut to state agencies, and sweeps of fund balances in various agency budgets.

"We're looking at reforms, and that's kind of where I have to leave it," said Senate Appropriations Chairman Andy Biggs, R-Gilbert, who is leading the effort for further cuts. He declined to give specifics.

His House counterpart, Rep. John Kavanagh, R-Fountain Hills, said Republicans in both the House and Senate agree the budget needs deeper cuts.

"I think $600 million is a reasonable number," Kavanagh said.

And it's reasonable, he added, to expect the cuts to come from education, the Department of Health Services and the Department of Economic Security. The DES provides the state's safety-net programs. The Department of Corrections is the main exception: Kavanagh said lawmakers might look at certain reforms, but they aren't interested in cutting its budget.

University representatives are lobbying hard to stop what they believe might be another $80 million in cuts beyond the $170 million that Brewer already has proposed.

Brewer went lightly with cuts to public education compared with other agencies, proposing about $100 million in reductions. She said she wanted to honor the public support for education, particularly K-12, that voters showed last year when they approved a temporary sales-tax increase.

Sen. Rich Crandall, R-Mesa, and chairman of the Senate Education Committee, said many school districts prepared for cuts of up to $200 million, so he suspects there could be room for an additional $100 million without causing too much alarm.

Sen. Rick Murphy, R-Peoria, and a member of the Senate Appropriations Committee, said the Arizona Health Care Cost Containment System, the state's Medicaid program, is likely to get cuts beyond the $541 million in savings from dropping 280,000 people off the health-coverage rolls, as Brewer had initially proposed.

"I'm not sure we've gone far enough," Murphy said. Although he voted for a bill that would eliminate the entire program as a way to signal the need for reform, he said he doesn't want to end AHCCCS.

"There has to be a real discussion about what level of AHCCCS funding is appropriate," he said.

Murphy, like other lawmakers, said the overall budget-cutting plan is still fairly broad, with specifics to come later.

The state debt

Biggs said Republicans want to stop borrowing, which contributes to the ongoing structural imbalance in the state budget.

Brewer's proposal calls for $575 million in borrowing to close out the current fiscal 2011 budget and an additional $115.4 million in borrowing the following year.

But the borrowing for fiscal 2011 would roll over into fiscal 2012, especially a proposed $330 million loan from an early-childhood-development fund. Although portrayed as an overnight loan, Brewer's budget pushes the $330 million repayment from one year to the next until it's paid off - and no one knows when that would be.

Eyeing the coming fiscal landscape, Biggs said the state should trim its spending now so it doesn't face a bigger shock when it hits a financial "cliff" in the state budget in the near future.

"In 2014, we have the great walk-off," he said. The temporary 1-cent-per-dollar sales tax, which is expected to raise up to $1 billion a year, expires in fiscal 2014. The state also must begin paying for a broader Medicaid population under the terms of the federal health-care-reform law that year.

Arizona has $3.8 billion in debt, with payments expected to cost $308 million in fiscal 2012, according to the Joint Legislative Budget Committee.

"A lot of members would like to make sure there are no debts, gimmicks and borrowing in the budget, especially for 2012," said House Majority Whip Debbie Lesko, R-Glendale.

Anxiety over cuts

Advocates of some of the state's education and safety-net programs, shut out of the process so far, are watching nervously.

Anxiety over Medicaid cuts, already high, could be exacerbated by further cuts to AHCCCS.

And education already has been hit hard, said Dana Naimark, CEO of the Children's Action Alliance.

"The proposal for 2012 has really serious, permanent disinvestments in education," she said of the governor's plan.

They include reductions in extra state aid and funds for school equipment that equal $62 per student, as well as replacing a program for school construction with a much smaller grant program.

No daylight

Although the budget is a public document, discussions of cuts beyond Brewer's proposal have been private.

They grew from small group meetings inside Republican offices to include Brewer when she returned earlier this week from Washington, D.C.

Her spokesman, Matthew Benson, said the governor hasn't ruled out further cuts. But, he said, the governor presented lawmakers with a plan that carefully balanced spending and the state's debt. "At this point, we're sticking to our position," he said.

He would not discuss the particulars of ongoing talks. Nor would most lawmakers.

Biggs said the hush-hush nature of the plan is needed to give Brewer and her staff time to examine it.

"I think we want to let them digest it, poke it, kick it around," he said.

It was Biggs who three years ago shut down an Appropriations Committee hearing because legislative leaders were holding closed-door negotiations in the House basement. Their private meeting undermined the work of his committee, he complained at the time.

But this time, it's different, he said.

The plan being worked on now involves all Republican lawmakers, from leadership to rank-and-file members. Whatever plan emerges will eventually be brought to both the Republican and Democratic caucuses for a full discussion, as well as public hearings, he said. That wasn't the case in 2008, he said, when leadership cut a deal and then pushed the proposal through.